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Wednesday 06.15.2016

Fed leaves rates unchanged in June meeting

Amid worries about slowing job growth, Federal Reserve officials remain only tentatively committed to two more rate hikes this year, and provided indications Wednesday that there might be only one.

As widely expected, the Federal Open Market Committee on Wednesday declined to raise its interest rate target at this week's two-day meeting from the current 0.5 percent. While the so-called dot plot of future rate projections indicates there still is a greater likelihood of two moves before the end of 2016, doubts are increasing.

At the April meeting, just one member indicated that the year would end with only one hike. That number jumped to six, or more than half of the 10 voting members, at the June session. Prior to the meeting, the fed funds futures market indicated just a 54 percent chance of one increase before the end of the year.

The summary of economic projections stated the funds rate is still projected at 0.9 percent for the end of 2016, which would represent two more quarter-point increases. But Fed officials lowered their expectations for future years, now looking for the funds rate to rise to 1.6 percent in 2017, as opposed to the 1.9 percent estimate in March, and to 2.4 percent in 2017, from a 3.0 percent estimate previously.

Investors haven't hoarded cash like this in 15 years

There's a lot to be nervous about in the investing world right now. Brexit. China's economy slowing. The US presidential election. Record-low bond yields. Stocks looking wobbly at record highs. And in response to all of this uncertainty, investors have ramped up their holdings of good old fashioned cash.

According to Bank of America Merrill Lynch's latest fund manager survey, investors surveyed by the firm now have 5.7% of their net holdings in cash, the highest percentage since November 2001.

Recall that in November 2001 the US was mired in recession while dealing with the fallout of both the tech-bubble bursting and the September 11 terrorist attacks. Right now the concern isn't so much a reaction to traumatizing events like these but an anxious anticipation that something bad will happen.

Elsewhere in the survey, BAML found that the strategy investors thought was most over-extended was being long "quality" stocks — these are basically stocks that have durable cash flows and strong competitive positions, among other characteristics. Being long quality stocks is another expression of investors being nervous.

Brexit Vote Is Only the Beginning

In 1982, North America was grinding its way through a second ‘double-dip’ recession in two years. Financial markets were in year 16 of a secular bear market that had been pummeling prices and grinding stock valuations from historic highs (PE’s above 20) in 1966 to historic lows (PE’s under 10) by 1982.

In the process of recurring economic strife, tax rates, and regulation had increased near historic highs, household savings rates had doubled back above 12% and household debt levels had been worked down near historic lows. As these economic foundations fell back into place, few people could see that a secular expansion cycle for corporate and government revenues was about to begin. From 1982 to 2000 the financial growth that followed was the strongest and longest ever recorded.

As the good times rolled on, key government regulation was pushed back from excessive to minimal, tax rates were steadily lowered, wages stagnated but women entered the workforce in mass to increase household income, interest and saving rates fell, and consumer debt levels rose along with the stock market. In the process, corporate pay incentives fixated on ways to continually escalate reported earnings and share prices at all costs.

A new market-focused media sector blossomed and pensions and individuals increasingly shifted their savings out of interest-bearing bank deposits and into publicly traded funds and markets. Like the Great OZ presiding over it all, the financial sector came to unprecedented power and influence over thinking and policies which became increasingly levered and risk-seeking.

9 Jobs Robots Could Be Replacing Soon

Humans have weighed the pros and cons of robots for decades. On the one hand, they automate processes that can be tedious and slow for humans. On the other hand, they do jobs humans might otherwise be paid for.

But the likelihood you’ll lose your job to a robot at some point in your life is slim, right? Well, Foxconn, the largest contract electronics manufacturer in the world, announced last month that it automated 60,000 jobs in one of its factories, replacing human workers with robots. But that’s manufacturing. It couldn’t happen in other fields, right? Not so fast. Here are nine jobs in which robots are showing some real proficiency.

Pharmacist - Back in 2011, the University of California, San Francisco Medical Center launched an automated, robotics-controlled pharmacy at two UCSF hospitals. Not a single error occurred in the 350,000 doses of medication prepared during the system’s recent phase-in. The move has helped human pharmacists move toward clinical decision support and consultation roles. Cab Drivers - Google has been working on automated cars for some time now, but how about automated taxi cabs … that fly? Chinese company Ehang designed a giant quadcopter designed to carry a single passenger — and it needs no pilot. The 184 drone has no controls — not even a joystick or steering wheel. In fact, it’s just a seat and a small tablet stand. To fly it, the user enters the cockpit and chooses a destination from the accompanying mobile app.

Debt Collectors - Debt collection, like many sectors of the economy, has started to go digital. So if the idea of talking with a debt collector automatically puts your stomach in knots, you may be in for a pleasant surprise: In the not-too-distant future, your debt collector may be a computer. Companies like TrueAccord are using collections centered around an online dashboard that allows both the creditor and the debtor to view account balances, set up and manage a payment plan and track progress toward paying the debt 24/7. Bank Tellers - When’s the last time you actually went to a bank? Even to the drive-thru? ATMs and apps automated a lot of banking services, but at least one bank, Coastal Federal Credit Union, implemented “personal teller machines” that do much of what the teller could. The bank reduced teller staff by 40% because of the move. Other banks are experimenting with similar options....

"If you're blaming law abiding citizens, you're protecting the terrorists"

Why oil could return to $30 a barrel this year

The oil crash is over, right? Maybe not. At least that's the warning from Morgan Stanley, which argues crude oil prices could spiral downward later this year to as low as $30 a barrel.

It's a counter intuitive warning, given that oil prices have actually soared by nearly 100% since mid-February. But Morgan Stanley points out that the huge rally has been driven largely by unexpected supply outages in Nigeria, Canada and elsewhere, all of which won't last forever.

"Oversupply is likely to return as outages resolve, and prices could fall back into a $30 to $50 oversupply pricing regime," Adam Longson, Morgan Stanley's lead energy commodity strategy, wrote in a report this week.

The Morgan Stanley call could serve as a warning to oil bulls who believe the epic supply glut is over for good and the market is finally poised to flip into deficit. Saudi Arabia's new energy minister recently told CNNMoney oil is likely to end the year around $60 a barrel. The reason why oil prices have rebounded since crashing to $26 a barrel four months ago is partly driven by a reduction in the amount of oil being pumped. The long-awaited "rebalancing" process has gained steam, led by declines in production from non-OPEC suppliers. As of March, the U.S. was pumping about half a million barrels of oil less than a year earlier, even though American production has overall been more resilient than expected.

480,000 Overstayed Visas Last Year

Immigration agents catch an abysmally small percentage of the illegal immigrants who arrived on visas but overstayed their welcome, authorities admitted to Congress Tuesday, describing a loophole that those around the globe are increasingly using to gain a foothold in the U.S.

At least 480,000 people overstayed their visas last year, adding to a backlog that’s reached some 5 million total, members of Congress said. But immigration agents launched investigations into just 10,000 of them, or about 0.2 percent, and arrested fewer than 2,000, less than 0.04 percent, saying the others don’t rise to the level of being priority targets.

“We utilize our prioritization scheme along with the resources that we have,” Craig Healy, assistant director for national security investigations at U.S. Immigration and Customs Enforcement, said as he struggled to defend the administration’s meager efforts.

He blamed a shortage of funding and a tricky environment, where authorities only have limited information, and it takes them months to decide if someone really did overstay their visa and if they are deemed serious enough offenders to make an effort to go after.

95 Percent of Time Networks Ignore Job Losses, Bankruptcies in Coal

President Obama threatened to bankrupt the coal industry before he was elected. Presumptive Democratic nominee Hillary Clinton recently told coal miners she would put a lot of them “out of business.”

Both statements were clear as crystal. The left wants to eliminate the coal industry. But the network news media have done their best to conceal the issue by ignoring the Obama administration’s role in harming the coal industry and killing jobs.

Between June 1, 2015, and May 31, 2016 — a year that included the bankruptcy of Peabody Energy and four other coal companies — 95 percent network news stories and briefs mentioning coal failed to show just how much the industry was suffering (36 of 38). ABC, CBS and NBC also went out of the way to disconnect currently “distressed” coal communities, from Obama’s regulatory actions through the EPA.

Coal’s struggle cannot be entirely blamed on Obama policies. Market forces like low gas and oil prices and weakening world economies played a role too. But federal regulation promoted by the Obama administration definitely took a toll ... one the broadcast networks continued to ignore. The Washington Times reported in 2014 that energy analysts blamed regulation for the “free fall” of coal mining jobs. Even when presumptive Democratic nominee Hillary Clinton candidly admitted she would put coal miners out of business, the networks failed to connect the frustration within coal country to liberal environmental policies already hobbling the industry. “[W]e’re gonna put a lot of coal miners and coal companies out of business ...” she said at a CNN/TV One town hall meeting on March 13.

America's Real Debt Shocker: $100 Trillion Owed in Unfunded Liabilities

Before he made his first million, before he did business on six continents, and before he became a Fortune 500 CEO, David Perdue got his start picking peaches for about 40 cents an hour while growing up in Macon, Georgia.

There his father taught him always “to add value,” Perdue says while recalling the stifling summer work from his air-conditioned office in Washington, D.C. “He told me years ago, ‘David, don’t ever worry about the job ahead of you; just take care of the one you’ve got now.’”

And now as the junior U.S. senator from Georgia, Perdue, 66, says the job has changed but the principle remains the same. In the Senate, he’s trying to leverage his private sector expertise to solve the public sector’s financial problems. After a year and a half in office, the veteran businessman turned freshman senator is confident he can diagnose the ills facing Washington. He’s confident he can add value.

“We owe $19 trillion, we’re in a debt crisis,” Perdue says matter-of-factly in an interview with The Daily Signal. Then after some quick arithmetic, he notes that the national debt combined with future unfunded liabilities amounts to “about a million dollars per household.”

Wal-Mart Experimenting With Robotic Shopping Cart for Stores

Wal-Mart Stores Inc. is working with a robotics company to develop a shopping cart that helps customers find items on their lists and saves them from pushing a heavy cart through a sprawling store and parking lot, according to a person familiar with the matter.

Such carts are an emerging opportunity for robotics companies as brick-and-mortar stores look for innovative ways to match the convenience of Amazon.com Inc. and other online retailers, said Wendy Roberts, founder and chief executive officer of Five Elements Robotics. Roberts, who spoke Tuesday on a robotics panel at the Bloomberg Technology Conference 2016, said her company was working with the “world’s largest retailer” on such a shopping cart.

That retailer is Wal-Mart, which is evaluating a prototype in its lab and giving feedback to the New Jersey robotics company, a person familiar said. Wal-Mart spokesman Ravi Jariwala said he couldn’t immediately comment on the robotic shopping cart.

Wal-Mart has said it’s investing heavily in technology to make it easier to shop in its stores as it competes with online retailers, like Amazon. It has developed a way for customers inside stores to scan and purchase items on their mobile phone so they can skip the checkout line. It’s rolling out a service where customers can buy groceries online and have their order delivered at a store to their car, and in some cities has joined with ride-sharing companies Uber Technologies Inc. and Lyft Inc. on a grocery delivery service.

Trump: Obama 'More Angry' at Him Than Gunman

Poll: 80% of Americans Think Government, Banks, Corporate Media are Corrupt

In a Gallup poll released Tuesday, 9% of Americans answering the survey expressed confidence in the Republican-controlled Congress to address the country’s challenges, down ten percentage points from one decade ago and ranking last among the 14 institutions measured.

Although rated worse than any other institution in the country, federal lawmakers are not alone in facing mass disdain by a US electorate who increasingly thinks that the system has stopped working. Only the military and police services saw over 50% of respondents express "a great deal" or "quite a lot" of confidence in the job they do every day.

Wall Street faced the largest drop in public approval ratings compared to a decade ago, as the country has failed to rebound from the economic calamity precipitated by speculative excess by the finance industry – banks fell from a 49% confidence rating down to a 22% rating. Recent polling data shows that 8% of Americans have confidence in the broader US financial system.

Similarly, the polling participants have lost confidence in corporate-owned media outlets for their failure to hold public officials accountable or give readers an unbiased truth. Both television news and newspapers fell ten percentage points, to all-time low confidence ratings of 21% and 20%, respectively.

Gold is Ready to Perform

A solid bid returned to the Gold sector this past week as the market saw a solid Gold Rally. And the GLD ETF alone added more than 15 tons of Gold. The precious metals Miners, which had fallen 10% from their recent Cycle highs, rallied to recover all of their losses, and to print new 2016 highs.

Considering that the Dollar also moved sharply higher last week (and continued to start the week) out of its own Cycle Low, the action in the Gold market is surprisingly bullish. If Gold were destined to decline for one more Daily Cycle into an Investor Cycle Low (ICL), I would have expected a rising Dollar to be the catalyst to send it lower.

If a new Gold ICL were not in play, there would be no reason for the Miners to make new highs, or for Gold to slice upward through its 10 and 20 day moving averages. Although I’m not willing – yet – to entirely rule out the possibility that Gold’s current DC could fail and drive price lower into an ICL, that’s not what the evidence currently supports. Admittedly, my last call for a possible $200 Gold Rally did not exactly pan out and that trade was stopped out. The key difference here is that call was, as clearly noted within the post, based more on a chart pattern and did lack Cycle’s confirmation. With this current setup, the Cycle’s picture is well defined.

In fact, the evidence is significantly lopsided here. None of the action here resembles the type of behavior you would see in a final, failing Cycle. The technical indicators (10dma cross back over 20dma – MACD bull cross – Strong RSI) and great price action (nearly $100 off the bottom) both point to only the first Daily Cycle of what is generally a 20-25 week Investor Cycle. If that’s the case, we could see an additional 10-15 days of generally higher prices as Gold rallies toward a typical day 20, 1st Daily Cycle top.

The Subprime Mortgage is Back: it’s 2008 All Over Again

Apparently the biggest banks in the US didn’t learn their lesson the first time around… Because a few days ago, Wells Fargo, Bank of America, and many of the usual suspects made a stunning announcement that they would start making crappy subprime loans once again! I’m sure you remember how this all blew up back in 2008.

Banks spent years making the most insane loans imaginable, giving no-money-down mortgages to people with bad credit, and intentionally doing almost zero due diligence on their borrowers. With the infamous “stated income” loans, a borrower could qualify for a loan by simply writing down his/her income on the loan application, without having to show any proof whatsoever.

Fraud was rampant. If you wanted to qualify for a $500,000 mortgage, all you had to do was tell your banker that you made $1 million per year. Simple. They didn’t ask, and you didn’t have to prove it.

Fast forward eight years and the banks are dusting off the old playbook once again. Here’s the skinny: through these special new loan programs, borrowers are able to obtain a mortgage with just 3% down. Now, 3% isn’t as magical as 0% down, but just wait ‘til you hear the rest. At Wells Fargo, borrowers who have almost no savings for a down payment can actually qualify for a LOWER interest rate as long as you go to some silly government-sponsored personal finance class.

More Than Half of U.S. Workers Are Leaving Some Vacation Days Unused

More than half of U.S. workers left some vacation time unused in 2015, depriving the American economy of $223 billion in spending on restaurants, home-improvement projects, hotels and other travel, according to a new study.

The main culprit: the spread of smartphones, the Internet and other technologies increasing employees’ attachment to work. “The constant connectivity makes us feel so integral and indispensable that we have a harder time getting away,” said Katie Denis, the Senior Director of Project: Time Off, a travel-industry initiative that commissioned the research.

The study found that workers used 16.2 vacation days on average last year, compared with the long-term average of 20.3 days from 1976 to 2000. More than half of workers surveyed as part of the research — 55% — left days unused last year, up from prior years, Ms. Denis said, though figures aren’t exactly comparable because the methodology changed.

The online survey included 5,641 people who work more than 35 hours weekly and get paid time off. Conducted by GfK, it was based on a representative random sample of the U.S. population and included managers. Oxford Economics, an economic analysis firm, used the survey results and data from the Labor Department’s Bureau of Labor Statistics’ Current Population Survey to estimate historical levels of vacation activity. In total, Americans left 658 million vacation days unused last year. Of those, 222 million were forfeited because they couldn’t be rolled over or paid out in any way. That means an average of two full days were forfeited per worker.

Unicorn Startup Zenefits Lays Off Another 100 Employees, Closes Arizona Sales Office

Troubled unicorn startup Zenefits continues to struggle, and its CEO David Sacks announced on Tuesday that more than 100 employees will be laid off and more bought out. This is the second round of layoffs since cofounder Parker Conrad resigned in February and Sacks took over. That round cut 250 employees, almost all in sales. Today’s layoffs will result in 106 “job eliminations” according to an email Sacks sent to the entire Zenefits staff. Those jobs include both sales and operations, but the entire Arizona sales office will be shuttered–only operations employees will remain there.

Sacks also offered all other employees who joined before Conrad’s ousting a two-month severance package as a voluntary buyout. “I recognize that the new Zenefits may be a very different company than the one many of you joined,” Sacks wrote. “And if you are not motivated by our mission to make entrepreneurship easier, or if you do not agree with the new company values, or if your role has changed in ways that you cannot support, then you can take The Offer.”

Zenefits, which sells insurance through its cloud HR software, will undergo additional restructuring in its operations department. “What I learned is that we are too siloed, we have too much complexity and we have an opportunity to create a more customer-centric way of operating,” Zenefits COO Abhijeet Dived wrote in a separate all-hands email.

The company has been troubled ever since it failed to grow revenue as fast as expected last yearafter raising $500 million at a $4.5 billion valuation. The 35-year-old cofounder Conrad resigned as CEO in February as more details emerged about Zenefits’ fraternity-like culture and skirting of insurance regulations.

Inside Silicon Valley's Plan to Create a New Stock Exchange

Florida bank issues first U.S. credit card for use in Cuba

A small Florida bank will issue the first U.S. credit card intended for use in Cuba. That could make it easier for Americans to travel and work on an island largely cut off from the U.S. financial system, the bank announced Tuesday.

Pompano Beach-based Stonegate Bank says its Mastercard will be available Wednesday.

It will let U.S. travelers charge purchases at state-run businesses and a handful of private ones, mostly high-end private restaurants equipped with point-of-sale devices.

Until now, Americans have generally had to bring cash to Cuba and change it either at state institutions that impose a 10 percent penalty on the dollar or in informal exchanges with locals.

Pride in London 2016: The Bank of England will fly the rainbow flag for the first time this year

News reaches the Capitalist from the Bank of England that the annual celebration of the LGBT community in London is going to be extra special this year. The Bank of England is making LGBT history by flying the rainbow flag over its building for the first time next weekend.

The BoE will fly the rainbow flag atop its building from Friday 24 June, the first time in the central bank's history that it has flown anything other than the Union Jack. "It's very exciting", said a spokesperson. "We'll be marching in the Pride parade with our own bus next weekend, but this will be extra special."

The Bank has flown the Union Jack over its Threadneedle street since Scotland and England were united in the 18th Century, but folks at the BoE will fly in the face of traditionalism next week as the rainbow flag, a symbol of the gay and lesbian community, will take pride of place on Threadneedle street all weekend.

But Britain's regulatory bodies have more plans in-store. A spokesperson told The Capitalist that the central bank will have its very own bus in the annual Pride parade on 25 June, and will be joined by representatives from the Money Advice Service, the Financial Ombudsman, the Payment Systems Regulator and the Financial Services Compensation Scheme.

Wednesday 06.15.2016

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.